Company A had accounts receivable of $100,000 and allowance for uncollectible accounts of $5,000 at 31/12/20X1. After the audit of Company A, the independent auditors concluded that account receivable and allowance for uncollectible accounts was fairly stated. Before the completion date of the audit fieldwork, the auditors received information that the warehouse of company X, a major customer of A, was destroyed by a flood in early February, 20X2. As a result, company X defaulted on debt. The account receivable of $30,000 from customer X originated on December 25, which payment term being net 60 days. The receivable from X is considered as collectible as at 31/12/20X1. Requirement: Considering the news of the financial condition of customer X as February 20X2, what response the auditors should take in relation to the account receivable of company A?

Company A had accounts receivable of $100,000 and allowance for uncollectible accounts of $5,000 at 31/12/20X1. After the audit of Company A, the independent auditors concluded that account receivable and allowance for uncollectible accounts was fairly stated. Before the completion date of the audit fieldwork, the auditors received information that the warehouse of company X, a major customer of A, was destroyed by a flood in early February, 20X2. As a result, company X defaulted on debt. The account receivable of $30,000 from customer X originated on December 25, which payment term being net 60 days. The receivable from X is considered as collectible as at 31/12/20X1. Requirement: Considering the news of the financial condition of customer X as February 20X2, what response the auditors should take in relation to the account receivable of company A?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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